From Ukraine to Bermuda: why are more and more countries becoming cryptocurrency-friendly?
In this article, we will discuss the success of bitcoin in some countries. Everything is moving toward the largest cryptocurrency gaining legal status in new and emerging countries. We will also discuss why more and more countries are becoming friendlier to accept cryptocurrency, and why crypto payments are gradually coming out of the “gray” legal zone.
Switzerland wants to make Bitcoin a reserve asset like gold
Swiss non-profit think tank 2B4CH suggested making Bitcoin one of the reserve assets of the Bank of Switzerland. Gold has the same status. If this happens, it would be reflected in Article 99(3) of the Swiss Federal Constitution. A minimum of 100,000 signatures is needed to put the initiative to a vote.
The think tank’s founder said that even with insufficient signatures, the issue would lead to discussions. Their core goal is to “inform local citizens about cryptocurrencies”. This kind of result will be a success.
If the vote is a success, the Swiss National Bank, or SNB, will need to learn how to add bitcoin to its reserves, recognizing it as “the best and safest financial instrument. Such a decision would put Switzerland at or near the top of the crypto industry.
Recall that Switzerland has already become one of the most cryptocurrency-friendly countries in the world. The Zug District launched bitcoin payments for public services back in 2016. Also last month, the Swiss Financial Markets Supervisory Authority approved the country’s first crypto fund. This came after authorizing the launch on the Swiss Exchange of the digital asset market.
Ukraine joined the list of cryptocurrency-friendly countries
The main purpose of Ukraine’s draft laws is to create a safe space for the introduction of bitcoins and other cryptocurrencies within the country. Crypto now has a legal definition here. Regulations define the use.
The adoption launched the legalization of the cryptocurrency market in Ukraine. Previously, it existed only within the regulatory “gray zone.” Recognition of cryptocurrency and exchanges at the legal level means that participants of virtual assets can now establish banking relationships with commercial banks in Ukraine.
Access to banking services may encourage foreign cryptocurrency companies to set up stores in Ukraine. Shortly, the country may well become a center for cryptocurrency and blockchain technology.
The arrival of foreign cryptocurrency exchanges in Ukraine legally will also be a positive moment to attract foreign investment in the digital economy of the country. The emergence of stricter regulatory requirements in several jurisdictions and Ukraine’s recognition of digital assets may encourage cryptocurrency businesses to move here. This is a path to additional investment in Ukraine’s economy.
What other countries did not tax bitcoin in 2021?
The legal status of cryptocurrencies remains ambiguous across jurisdictions. Some countries create bans or strict application rules, while others prefer a more open approach to cryptocurrency.
- Belarus is taking an experimental approach to cryptocurrencies. In March 2018, a new law legalized cryptocurrency activity here. Crypto market participants in Belarus, represented by all individuals and legal entities, received freedom from taxes until 2023. Mining and investing in cryptocurrencies are considered personal investments legally. There is no income or capital gains tax.
- Germany offers a unique approach to taxing digital currencies such as bitcoin. Unlike most other nations, Europe’s largest economy treats bitcoin as private money, not currency, commodities, or stocks. For German residents, any cryptocurrency that is held for more than a year is not taxed. The amount of the assets does not matter. If assets are held for less than a year, no capital gains tax is assessed on sales for amounts not exceeding 600 euros. Businesses operate under different rules. A startup registered in Germany has to pay corporate income tax on profits from cryptocurrency, just like any other asset.
- Hong Kong. When buying digital assets for long-term investment purposes, any gain on disposal is not subject to income tax in Hong Kong. This isn’t related to corporations. Their crypto profits from Hong Kong are taxable. Also, in Hong Kong, bitcoin is considered a virtual commodity for tax purposes.
- El Salvador in June 2021 became the first country in the world to recognize bitcoin as legal tender. The country also exempted foreign investors from paying tax on their bitcoin profits. The move underscores the country’s intention to attract foreign investors with cryptocurrency portfolios.
- In Malaysia, cryptocurrency transactions are not yet taxed, and cryptocurrencies are not subject to capital gains tax. The reason is the digital currencies are not considered assets or legal tender at the state level. However, profits from active cryptocurrency trading may be treated as income and therefore considered as taxable income.
- Malta does not apply capital gains tax to established digital currencies such as Bitcoin. However, cryptocurrency transactions are comparable to day trading in stocks. They include business income tax at 35%. However, the tax can be reduced to 5–0 percent with “structuring options” available under the Maltese system.
- Portugal has one of the most favorable tax regimes in the world. Income from the sale of cryptocurrencies by individuals is tax-free since 2018. Cryptocurrency trading is not considered investment income (which is usually taxed at 28%). However, businesses that accept digital currency as payment for goods and services must pay income tax.
- In Singapore, companies must pay income tax if the main business is trading in cryptocurrency, or if cryptocurrency is accepted as payment for goods and services.
- Slovenia treats individuals and legal entities separately under its cryptocurrency taxation system. Individuals are not subject to capital gains tax on the sale of crypto, and profits are not considered income. However, companies that receive payments in cryptocurrency or as a result of mining are required to pay tax at the corporate rate. Distributions of tokens during an ICO are taxed up to 50%.
- Bermuda is “the one country” that does not tax cryptocurrency profits. Bermuda is regarded as a tax haven. Digital assets have no special status but operate in a general low-tax format.
The attitude of the world’s governments toward Bitcoin is categorically polar, either yes or no.
El Salvador’s recognition of Bitcoin as a legal tender has become a source of inspiration for other Central and South American countries. Many are planning to do the same. Ukraine’s Ministry of Digital Transformation is already considering early use of the digital hryvnia CBDC.
China created a strict cryptocurrency control policy with a ban on token trading and fundraising back in 2017. Now Beijing has stepped up the cryptocurrency pressure once its digital yuan project began going through the public testing stages.
Nevertheless, it has become commonplace for blockchain organizations to publish policy toolkits. This helps lawmakers and regulators better understand the cryptocurrency industry. Of course, many crypto market participants view this kind of promotion of cryptocurrency control negatively. However, with cooperation from countries such as Ukraine, which adopt fairer regulatory policies, both participants can benefit from the restrictive crypto laws enacted in the U.S. and Europe.